Our opinion on the current state of REM

Johann Rupert's Remgro (REM) is an investment holding company which owns 28,2% of Rand Merchant Bank Holdings (RMH) and 3,9% of Firstrand. But that is not Remgro's only investment. It also owns Mediclinic, an international healthcare company with divisions in Switzerland, Southern Africa and United Arab Emirates which has now been delisted from the JSE. Remgro recently sold its 25,8% stake in the London-listed Unilever Group for R4,9bn in cash plus the Unilever spreads business in Southern Africa. This gave it ownership of brands like Flora and Rama and other spreads. In its foods division it also owns 31,8% of Distell and 77,2% of RCL Foods (where the Unilever spreads division may be housed in a new subsidiary called "Silver 2017"). Under insurance, Remgro owns 29,9% of RMI. It owns a number of other investments including a 23,1% stake in Grindrod and a 30% stake in Seacom. The Competition Tribunal has approved the acquisition by Community Investment Ventures Holdings (CIVH), a Remgro subsidiary, of Vumatel. Vumatel is a "last mile" fibre infrastructure company. In terms of the approval, Vumatel must supply free uncapped fibre services to schools near where it's networks pass for the next 10 years. On 2nd December 2020 Remgro announced that it is planning to increase its stake in RCL Foods at a cost of R805m. The company has the intention of getting into the electricity generation business to supply its own businesses because it believes that Eskom can no longer be relied upon. On 15th November 2021 Remgro announced an offer by Heineken to buy 100% of Distell for R41,1bn. As Remgro holds 31,7%, this will result in a substantial cash injection when the transaction is complete. On 10th November 2021 the company announced a transaction with Vodacom to form "Infraco" in which Remgro will retain a 70% stake, potentially falling to 60%. Infraco will include Dark Fiber Africa and Vumatel and Vodacom will inject R9bn in cash. It will focus on dominating the provision of fibre on South Africa. On 4th August 2022 the company announced that it had come to an agreement to purchase the 55% of Mediclinic which it did not own. The deal valued Mediclinic at just under R75bn which compares with its market capitalisation before the agreement of R72,7bn. Mediclin was then delisted from the JSE. In its results for the year to 30th June 2023 the company reported revenue of R48,1bn compared with R41,9bn (restated) in the previous year. Headline earnings per share (HEPS) increased by 8,9% and intrinsic net asset value (INAV) increased by 16,6% to 24847c per share. The results were impacted by various corporate actions including the restructuring of Outsurance, the sale of Grindship, the unbundling of Grindrod and the acquisition of a further 5,4% of Mediclin. The company said, "The increase of 8.7% in headline earnings is mainly due to higher contributions from OUTsurance Group’s continuing operations, Mediclinic, the Pembani Remgro Infrastructure Fund (PRIF), KTH and FirstRand, as well as higher interest income and a foreign exchange gain". Technically, the share made a low at 8388c on 7th September 2020 and has been rising since then. It is currently trading at R157.19 on a P:E of 12,54. We think it remains good value at current levels.